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At a Glance:
Gates v. City of Dallas
March 19, 1986
704 S.W.2d 737
Texas Supreme Court
Published Opinion

Gates v. City of Dallas

Supreme Court of Texas.

Charles GATES, Petitioners,


CITY OF DALLAS, Respondent.

No. C–3957.


Feb. 12, 1986.


Rehearing Denied March 19, 1986.

Attorneys & Firms

*738 Michael W. Stucker, Hercules & Lavery, G. Frank Brown, Dallas, for petitioners.

Paul K. Pearce, Jr., Office of the City Atty., of Dallas, Dallas, for respondent.



This is an appeal from a denial of attorney’s fees in a suit against the City of Dallas for failure to pay insurance benefits. The City of Dallas established a self-insurance plan for health benefits of its employees and their dependents which was administered by Republic National Life Insurance Company. Betty Gates, a dependent, suffers from multiple sclerosis, requiring a nurse to attend her. The nursing services were paid for under the City’s insurance plan. Thereafter in 1982 the City took over administration of the self-insurance fund and denied further payment of benefits to Mrs. Gates. Gates then sued the City of Dallas for denial of insurance benefits. The trial court rendered partial summary judgment in favor of Gates for the unpaid accrued benefits. Thereafter, the parties stipulated that the City would pay future claims under the plan. Recovery of attorney’s fees was the sole issue upon which the parties proceeded to trial. The trial court further found reasonable attorney’s fees in the amount of $120,000 to be recoverable from the City of Dallas pursuant to Tex.Ins.Code Ann. art. 1.14–1(7) (Vernon 1981).

The court of appeals reversed the award of attorney’s fees and affirmed the trial court judgment in all other respects. 684 S.W.2d 792. We reverse the judgment of the court of appeals and remand to that court for a determination of reasonableness of the amount of attorney’s fees awarded by the trial court.

The City of Dallas is a home rule municipal corporation. As such it has broad powers of self-government. City of Crystal City v. Crystal City Country Club, 486 S.W.2d 887, 889 (Tex.Civ.App.—Beaumont 1972, writ ref’d n.r.e.). Proprietary functions are those functions performed by a city, in its discretion, primarily for the benefit of those within the corporate limits of the municipality. Id.

Unlike governmental functions, for which municipal corporations have traditionally been afforded some degree of governmental immunity, proprietary functions have subjected municipal corporations to the same duties and liabilities as those incurred by private persons and corporations. See 298 U.S. 668, 56 S.Ct. 834, 80 L.Ed. 1391 (1936).

When the City of Dallas entered into the insurance contract with Gates, it acted in its proprietary role and was “clothed with the same authority and subject to the same liabilities as a private citizen.” article 2226, governing claims based upon a written contract, as would be a private citizen.

Findings of fact and conclusions of law were filed by the trial court which support the award of attorney’s fees pursuant to art. 2226.

By applying what it terms a settled rule of construction, the court of appeals reached a different conclusion. An examination of the rule and its origins indicate that the rule is only one of many factors to be considered in determining the legislative intent underlying a particular statute.

The general rule stated by the court of appeals in this case is that “when a statute uses the word ‘corporation,’ the statute ‘is construed to apply only to private corporations and does not include municipal corporations, unless the statute expressly so provides.’ ” Id. at 410. Therefore, it was a “matter of ascertaining the intention of Legislature with respect to including them.” Id. The Commission stated that

[t]he intention of the Legislature in enacting a law is the law itself, and must be enforced when ascertained, although it may not be consistent with the strict language of the statute. Courts will not follow the letter of the statute when it leads away from the true intent and purpose of the Legislature and to conclusions inconsistent with the general purpose of the act. (Citations omitted.) A *740 matter which is within the obvious purpose and meaning of the statute is as much within the statute as if it were within the letter.

Id. The general rule was merely cited as one of the factors to be considered in determining the legislative intent underlying the statute.

This court considered the general rule as one of the factors in determining whether the legislature intended municipal corporations to be included within the scope of an anti-trust statute. Id. at 56, 161 S.W.2d at 768.

Although the court of appeals cites Central Power as authority for its decision, it misapplied the general rule of construction. The court, through strict application of the rule appears to have forgotten that “[i]n interpreting a statute, a court shall diligently attempt to ascertain legislative intent and shall consider at all times the old law, the evil, and the remedy.” Tex.Gov.Code Ann. § 312.005 (Vernon 1986).

It is apparent that the legislature intended article 2226 was amended to provide for a liberal construction to effectuate the remedial purposes of the statute. Furthermore, the statute places no limitation on the broad powers of self-government of a home rule municipal corporation when acting in a proprietary capacity. The only power the statute could be said to limit would be the power to freely breach any contract simply because the breaching party is a municipal corporation.

When all factors are considered, together with the general rule of construction, it is apparent that the “larger” use of the word “corporation” was intended. See article 2226.

The remaining cases relied upon by the court of appeals as authority for denying recovery of attorney’s fees do not persuade this court. In Id. at 1095.

*741 By allowing recovery of attorney’s fees pursuant to article 2226, we have afforded Gates the relief sought. It is not necessary that we address whether the same recovery could be allowed under the provisions of the Insurance Code. Thus, we reserve any decision as to the applicability of Tex.Ins.Code Ann. §§ 1.14–1 or 3.62.

Since the court of appeals held article 2226 inapplicable to municipal corporations, it did not reach the City’s points of error regarding reasonableness of attorney’s fees. The judgment of the court of appeals is reversed and the cause remanded to that court for determination of reasonableness of the attorney’s fees awarded.



Recodified in Tex.Civ.Prac. & Rem.Code §§ 38.001–.006, 1985 Tex.Sess.Law Serv. 7123 (Vernon).

End of Document